HK Plunges 8%; China, HK Lower Rates

123jump.com Staff
08 Oct, 2008
New York City

China and Hong Kong lowered key lending rates in lock steps with the Fed led coordinated to move to lower rates. HK lowered rates by 0.5% and China dropped lending rate by 0.27% for 1-year or longer dated maturities. In trading, benchmark stock indexes in Hong Kong plunged 8% and in China 3%.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong Monetary Authority lowered its key rate to 2.5%. China lowered key interest rates and bank deposits cash reserve ratios before the coordinated move led by the U.S. Fed, ECB and other central banks. Hong Kong foreign currency reserve assets increase to US$160.6 billion at the end of September.[/R]

Market Sentiment

In Hong Kong trading Hang Seng Index slipped 8.17% or 1,372.03 to 15,431.73, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, fell 11.46% or 964.16 to 7,452.74. In Shanghai trading CSI 300 Index tumbled 3.8% or 79.57 to 2,022.88.

Daily turnover on main-board was HK$77.8 billion from HK$47.33 billion yesterday.

China lowered its key lending rate and lowered cash reserve requirements at its banks. The key lending rate for one-year loans is lowered by 0.27% to 7.20% and bank cash reserve required lowered 1% to 17%. The move to lower interest rate was separate but happened at the time when the U.S. Fed, ECB and other central banks in four other countries lowered rates.

HKMA to Cut its Base Rate to 2.5%

The Hong Kong Monetary Authority reported today that the formula for the determination of the base rate will be changed by reducing the spread of 150 basis points above the U.S. federal funds target rate to 50 basis points tomorrow.

The base rate will be cut to 2.5% from 3.5% from tomorrow.

HKMA chief executive Joseph Yam said the new system penal element at 150 basis points in the discount rate has become unjustified in the wake of the turbulence obtaining in the credit markets.

Separately, the monetary authority announced today that the official foreign currency reserve assets of Hong Kong rose to US$160.6 billion at the end of September 2008.

Hong Kong is the world''s ninth largest holder of foreign currency reserves after China, Japan, Russia, India, Taiwan, Korea, Brazil and Singapore.

Beijing Increases Gas and Diesel Oil Prices

The Beijing Municipal Commission of Development and Reform said yesterday that the benchmark prices for gasoline and diesel oil will increase Rmb200 and Rmb290 correspondingly.

In particular, gasoline 93, now fetches Rmb6.37, which reflects an increase of 0.17% from yesterday, while gasoline 97 rose from Rmb6.60 to Rmb6.78 per liter.

The price increases are confined to the city of Beijing, which is supplied with improved processed oil products that are in sync with IV European standards.

The report notes that Beijing Municipal Commission of Development and Reform has pledged to subsidize agriculture, forestry, mass transit and the taxi industries to reduce the impact of higher gas prices.

China''s Foreign Debt Increases 14.4% to US$427.43 billion

Xinhua News Agency reported on its Web site that the State Administration of Foreign Exchange said China''s outstanding foreign debt, excluding Hong Kong, Macao and Taiwan, increased by 14.4% higher than the second half of 2007 to US$ 427.43 billion through June.

Medium and long-term foreign debt gained 5.56% from the end of 2007 to US$ 162.07 billion and short-term debt gained 20.57% to US$ 265.37 billion.

According to the report, China borrowed US$ 19.51 billion of medium- and long-term foreign debt in the first six months of the year, reflecting an increase of 26.91% from the same period a year earlier.

Also the country repaid US$8.77 billion of principal on medium- and long-term debt in the first half, while interest in the period jumped 10.23% on the year to US$1.92 billion.

Gainers & Losers

PetroChina slipped 14.1% and CNOOC declined 14.3%.

Aluminum Corp of China slumped 19.8% after cautioning that third quarter profit will fall more than 50%.

Financial stocks declined as well. ICBC slid 8% and China Construction Bank plunged 12.4%.

China Communications Services tumbled 32.5% on concern over lower telecom industry spending.

ZTE Corp also declined 24.5 % after Merrill Lynch slashed its rating on the stock to ""underperform"" from ""buy"" on increasing competition from Huawei.

China Mobile fell 8.4%.